Tax experts on both sides of the aisle are utterly baffled by the finer points of the Republican tax overhaul, which could potentially go into effect as soon as Jan. 1. "It's crazy," one GOP lobbyist explained to Politico. " I don't think anyone could explain it, let alone comply with it [by the start of 2018]."
Because of the haste with which Republicans are pushing the legislation through, analysts say the overhaul leaves open gaping loopholes and confusingly vague passages that no one really understands. A proposal to tax private university endowments, for example, doesn't define what an endowment actually is and some schools have thousands. Another example involves a loophole that could potentially allow a person making $500,000 to save $30,000 by reclassifying their income.
A top Treasury Department tax official under former President George W. Bush, Greg Jenner, put it simply to Politico: "The more you read, the more you go, 'Holy crap, what's this?' We will be dealing with unintended consequences for months to come because the bill is moving too fast." Read more about the loopholes that are concerning Republicans and Democrats alike at Politico. Jeva Lange
House Republicans who stand opposed to the GOP tax reform bill say they haven't heard from leadership in weeks, signaling confidence by House Speaker Paul Ryan (R-Wis.) and House Majority Whip Steve Scalise (R-La.) that the legislation will pass without difficulty in a floor vote later this week. "I think they've made the calculation that they have 218 [votes]," Rep. Peter King (R-N.Y.) told Politico.
Scalise and his team will officially count votes Monday night; House Republicans can lose up to 22 votes and still pass the plan. The bill includes new tax brackets and rates, but would not change the rate for married Americans making more than $1 million. Additionally, the House version of the overhaul bill would add an expected $1.457 trillion to the federal deficit over the next decade, a problem for many Republicans who oppose the bill.
The House Rules Committee will review the bill on Wednesday, although no major amendments are expected, Politico reports. A floor vote could come as early as Thursday, although Republicans are leaving open Friday as potential wiggle room, in case any problems arise.
The legislation could face more obstacles in the Senate, where the margin for passing the overhaul is even slimmer. Additionally, the House and Senate bills have a number of major differences, including that the Senate version leaves seven tax brackets, versus the House proposal's four brackets, and lowers the top rate for wealthy individuals to 38.5 percent from 39.6 percent.
"The House will pass its bill, the Senate will pass its bill, and then we will get together and reconcile the differences, which is the legislative process," Ryan reassured last week. Jeva Lange
Despite President Trump promising that the middle class will be the "big winners" of the Republican tax plan, Americans are not exactly convinced. In a new ABC News/Washington Post poll, a whole 60 percent of adults said that the legislation "favors the rich" while a mere 13 percent think it "favors the middle class." Seventeen percent of people believe the bill "treats all people equally."
More surprising, perhaps, is that even affluent Americans agree. Among people making more than $100,000 a year, 61 percent think Trump's tax plan benefits the wealthy more than any other class.
Independent analysis has found that the plan would probably personally save Trump $1 billion. Trump has told reporters: "I don't benefit. In fact, very very strongly, as you see, I think there's very little benefit for people of wealth." Among Republican voters, a plurality believe the plan treats all people equally, while just 25 percent think it favors the rich.
— Kyle Griffin (@kylegriffin1) November 3, 2017
Overall, 50 percent of Americans said they oppose the GOP tax plan while 33 percent support it. The poll reached 1,005 people over landlines and cell phones between Oct. 29-Nov. 1. It has a margin of error of 3.5 points. Read more the Republican tax plan at The Week. Jeva Lange
House Republicans released their Tax Cuts and Jobs Act on Thursday, a tax reform proposal that includes new tax brackets and rates, The Wall Street Journal reports.
The proposal would not change the tax rate for married Americans making more than a million dollars, which is currently at 39.6 percent. Married Americans making up to $90,000 would pay 12 percent, which could potentially mean they pay more; under current law, married couples making less than $18,650 only pay 10 percent, but couples making up to $75,900 pay 15 percent. The GOP additionally proposed that married couples making $260,000 pay 25 percent, and American families making up to $1 million, 35 percent.
With this bill, a typical middle-income family of four, earning $59,000 (the median household income), will receive a $1,182 tax cut.
— Brendan Buck (@BrendanBuck) November 2, 2017
Republicans have also proposed raising the standard deduction, with married couples able to deduct $24,000, up from the current $12,700. The child tax credit, now at $1,000, would also get a boost, to $1,600 plus $300 for the taxpayer, spouse, and non-child dependents.
Only very minor changes were proposed for retirement accounts, while the GOP additionally proposed lowering mortgage interest deduction for new homes to $500,000, down from today's $1 million. The GOP also proposed a $10,000 cap on state and local tax deduction (SALT). Read the full breakdown at The Wall Street Journal, and why the Republican tax plan is already on the ropes at The Week. Jeva Lange
House Republicans will not lower taxes for the most affluent Americans, people familiar with House Speaker Paul Ryan's (R-Wis.) plans told The Wall Street Journal. While the GOP had initially proposed a decrease to 33 percent for the highest earners, down from the current 39.6 percent, Republicans are now poised not to change the rate at all, or change it only by a very small amount. "The overall bill, it is a winner, and that's why I'm excited," said House Majority Leader Kevin McCarthy (R-Calif.) ahead of the legislation's release, which has been postponed from Wednesday to Thursday.
The exact income brackets are not yet clear, although The Wall Street Journal calls it "likely" that the 39.6 percent tax rate will apply to a higher threshold than today's $480,050, meaning fewer wealthy Americans will actually pay at that level. Additionally, Democrats are expected to take issue with many benefits that remain for the wealthy, including the higher cutoff, a delayed, phased-in repeal of the estate tax, and other proposals the richest Americans can use to pay less than their 39.6 percent rate.
Still, "some high-income wage earners could face higher federal tax bills, particularly if they live in high-tax states and are thus no longer able to deduct their state income taxes, as the plan will suggest," The Wall Street Journal writes.
President Trump on Sunday urged House Republicans to pass the Senate budget proposal and start working to pass tax reform, saying that haggling with the Senate would delay a much-needed legislative accomplishment and could hurt the GOP in next year's midterm elections. "We are on the verge of doing something very, very historic," Trump said, according to a person who was on the conference call. Another GOP aide told The Associated Press that Trump warned that failure to pass the bill would result in midterm Republican losses.
Trump's participation in the call to the House Republican Conference ramped up pressure on House Republicans to get behind the Senate's spending plan even though it adds $1.5 trillion to the federal deficit over a decade due to tax cuts. House Speaker Paul Ryan, also on the call, signaled his intention to pass the Senate budget bill this week in order to meet an end-of-the-year deadline for tax reform.
"I think we are going to get our taxes," Trump told Fox Business Network's Maria Bartiromo as part of an interview segment airing over Sunday and Monday. "Hopefully before the end of the year, but maybe much sooner than that. There's great spirit for it. People want to see it." Jeva Lange
The White House released its analysis of the GOP tax reform plan Monday, touting corporate cuts that administration officials estimate would eventually increase the average household income by $4,000 per year. President Trump has signaled a willingness to be flexible on the terms of the final tax legislation, although he's been firm on cutting corporate taxes to 20 percent, down from 35 percent, The Hill reports.
"More assets like machines let workers produce more, and when workers can produce more, businesses can afford to pay their workers more," explained White House Council of Economic Advisers chairman Kevin Hassett.
Democrats have pushed back on the report, with Senate Minority Leader Chuck Schumer (D-N.Y.) claiming the CEA used "fake math" to reach its conclusions. "This deliberate manipulation of numbers and facts could lead to messing up the good economy the president inherited from President Obama and hurting the middle class," Schumer argued.
The nonpartisan Tax Policy Center has weighed in to say that "overall benefits of lower corporate taxes tilt heavily toward those with higher incomes," Reuters reports. "It said middle-income taxpayers would receive less than 10 percent of the benefit of a corporate rate cut while the top 20 percent would receive about 70 percent. The top 1 percent would see about one-third of the benefits and the top 0.1 percent would get about one-fifth, the center has said."
Approximately 30 percent of taxpayers earning between $50,000 and $150,000 a year will see their taxes increase under the Republican tax proposal, the nonpartisan Urban-Brookings Tax Policy Center reported Friday. And while most Americans making between $150,000 and $300,000 will also see tax increases, the top one percent — earning more than $900,000 a year — will see taxes drop by an average of $200,000, The Washington Post reports.
President Trump has championed the Republican plan as being a major relief for the middle class, although 1 in 4 households would see their taxes go up. Additionally, The New York Times reports that Trump (or his heirs) would personally gain $1.1 billion if the proposal was implemented due in large part to the repeal of the estate tax.
The Tax Policy Center also concluded that the Republican plan would increase the deficit by $2.4 trillion over the next 10 years. "Republicans believe they will offset that lost revenue with increased economic growth prompted by the tax plan," The Washington Post writes. But analysts fret that if "economic growth projected by Republicans fails to materialize," then the massive cuts could "balloon the federal deficit and debt," Reuters reports. A handful of Republicans have already spoken out against the proposal: "The way we handle our finances, we as a nation are the greatest threat to our nation," Sen. Bob Corker (R-Tenn.) said. Jeva Lange